Indian corporate sector has raised significant funds through foreign currency loans like FCCBs, ECBs, etc., during FY07 and FY08. The corporate sector had preferred to keep its forex payable positions un-hedged in anticipation of appreciating INR trend to continue wherein FCCBs would eventually get converted into equity. While at the same time exports were hedged using various derivative instruments.
The foreign exchange derivatives contracts entered into by the Indian companies in the last two to three years has starting taking its toll now on its performance on the back of continual depreciation of the rupee against the dollar. During that period banks sensed an opportunity and approached the exporters with derivative products claiming that they have a product which can save the exporters from the impending Rupee appreciation losses.
According to a recent research the BSE 100 universe reveals that a large portion of forex payables is still outstanding and unhedged. The aggregate outstanding unhedged forex loan and gross currency derivative position for the BSE 100# universe was INR 1.3 tn and INR 1.9 tn,respectively (based on last reported balance sheets of companies).
